Second-quarter profit slightly beat expectations; AI data center expansion determines the next phase of valuation upside

Overview

SK Telecom's second-quarter consolidated revenue was ₩4.4 trillion, down 0.8% quarter over quarter and up 0.5% year over year, about 1% below consensus; consolidated operating profit was ₩566.0 billion, about 3% above consensus. Traditional wireless service revenue fell 1.9% year over year, but increased profit contribution from SK Broadband and cost control offset revenue-side pressure. AI data center revenue grew 93% year over year, making SK Hyper's expansion plan the core topic of the earnings call. J.P. Morgan believes the upside value of AI data centers has not yet been fully priced into the shares and reiterates its Overweight rating.

Core views

The core investment thesis consists of stable telecom cash flow, the expansion option value of AI data centers, and the value of the Anthropic stake. SK Hyper intends to start in Ulsan by securing sites and power, and is advancing concrete negotiations with potential customers including global large technology companies, with a long-term target of 5GW. Its construction principle is to first obtain customer commitments, then build capacity and arrange funding from financial investors, project financing, or partners. The research is positive on South Korea's potential to become an AI ecosystem hub, SK Group's position in the global AI value chain, and the AI data center business's potential operating margin of about 15% to 20%; it also believes share-price volatility from Anthropic proxy trading may gradually ease.

Analysis framework

The report compares second-quarter actual results with market consensus to analyze variances, and uses a sum-of-the-parts valuation: the core telecom business is valued using discounted cash flow, Anthropic minority equity is referenced to the latest financing round valuation with a net asset value discount, while the AI data center and submarine cable businesses are valued by applying enterprise value multiples to expected 2030 to 2031 operating profit. The analysis also assesses expansion sequencing, customer acquisition, capital sources, unit economics, shareholder returns, and regulatory risks.

Methodology notes

• Valuation frameworkSum-of-the-parts valuation

  Separately value the core telecom business, Anthropic stake, and AI data center and submarine cable businesses, then aggregate them.

  This method is used to reflect differences between mature telecom operations and high-growth AI assets in cash-flow characteristics, risk, and valuation benchmarks, leading to a ₩110,000 target price.

• Valuation methodDiscounted cash flow method

  Assess core telecom businesses such as wireless, fixed-line, and traditional data centers by discounting future cash flows.

  The report assigns the core telecom business a value of about ₩17.6 trillion, reflecting its relatively stable cash-flow base.

• Relative valuationEnterprise value to operating profit multiple

  Apply a 6.6x enterprise value multiple to expected 2030 to 2031 operating profit for the AI data center and submarine cable businesses.

  This estimates the value of the related businesses at about ₩3 trillion, but actual value is highly dependent on customer contracts, capacity ramp-up speed, margins, and financing structure.

• Net asset value valuationLatest financing round valuation and net asset value discount

  Reference Anthropic's latest financing round valuation and apply a 30% net asset value discount to SK Telecom's less-than-0.3% stake.

  On this basis, the report assigns the Anthropic stake a value of about ₩3 trillion, reflecting minority ownership, liquidity, and valuation uncertainty.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• SK Telecom（017670.KS）

  The South Korean listed company stock directly covered by this report.

  Strengths

  Core telecom business cash flow is relatively stable, and SK Broadband's profit contribution is improving; AI data center revenue is growing rapidly, with SK Group AI value chain resources and potential external capital support.

  Weaknesses

  Wireless service revenue declined year over year, AI data centers are still in the stage of large-scale expansion and customer validation, and the share price is relatively sensitive to changes in AI asset valuation.

  Comparison

  Second-quarter revenue was about 1% below market consensus, but operating profit was about 3% above consensus; the share price has fallen 27% from its recent high, while the KOSPI fell 22% over the same period.

  Risks

  AI data center progress slower than expected, greater-than-expected follow-on impact from the data breach, persistent regulatory pressure, and share-price volatility triggered by AI-related assets.

• SK Telecom core telecom business

  The base cash-flow asset in the target price, including wireless, fixed-line, and traditional data center businesses.

  Strengths

  Cash flow is relatively mature, cost control is effective, and it can support dividends and investment in new businesses.

  Weaknesses

  Wireless service revenue declined 1.9% year over year, and traditional business growth upside is limited.

  Comparison

  The report values it at about ₩17.6 trillion using discounted cash flow, distinct from the relative valuation method used for AI assets.

  Risks

  Intensifying competition, user revenue growth falling short of expectations, regulatory pressure, and customer or cost impacts from the data breach.

• SK Hyper AI data center business

  A key new business for SK Telecom's valuation upside and share-price catalysts.

  Strengths

  Revenue grew 93% year over year, potential operating margin is about 15% to 20%, and the plan is to reduce demand and asset-burden risks by securing customers before construction and using external capital financing.

  Weaknesses

  The 5GW target is large in scale, and customers, sites, power, financing, and construction progress still need to be implemented step by step.

  Comparison

  The report values the AI data center and submarine cable businesses at about ₩3 trillion in total and believes this value is not yet fully reflected in the share price.

  Risks

  Insufficient customer commitments, capital requirements exceeding expectations, worsening financing terms, delayed production, and actual margins below expectations.

• Anthropic minority stake

  A strategic AI asset of less than 0.3% held by SK Telecom, and also a component of the sum-of-the-parts valuation.

  Strengths

  Provides the company with exposure to the global generative AI value chain and potential asset appreciation.

  Weaknesses

  It is a minority and illiquid equity stake, with valuation dependent on external financing rounds and limited direct control over operating results.

  Comparison

  The report references the latest financing round valuation and applies a 30% net asset value discount, arriving at a valuation of about ₩3 trillion.

  Risks

  A correction in private market valuations, widening liquidity discounts, and changes in proxy-trading sentiment could amplify volatility in SK Telecom's share price.

Key data

• Second-quarter consolidated revenue₩4.4 trillionDown 0.8% quarter over quarter and up 0.5% year over year, about 1% below market consensus.
• Second-quarter consolidated operating profit₩566.0 billionAbout 3% above market consensus.
• SK Broadband operating profit contribution₩132.0 billionAn important driver of the consolidated operating profit beat.
• Wireless service revenue growthDown 1.9% year over yearRevenue remained under pressure despite the company's customer acquisition strategy to raise average revenue per user.
• AI data center revenue growthUp 93% year over yearMainly driven by the Pangyo data center acquisition and improved utilization at the Gasan data center.
• Long-term AI data center capacity target5GWThe plan is to start in Ulsan and advance negotiations with potential customers including global large technology companies.
• Committed capital₩750.0 billionOf which ₩330.0 billion is planned to be invested this year.
• Potential AI data center operating marginAbout 15% to 20%This is the main basis for the report's positive view on the unit economics of the business.
• AI data center and submarine cable valuationAbout ₩3 trillionBased on a 6.6x enterprise value multiple applied to expected 2030 to 2031 operating profit.
• Target price and potential upside₩110,000; about 18.0%The target horizon is December 2027, with a reference share price of ₩93,200 on August 5, 2026.
• Quarterly dividend per share₩830Restored in the first quarter to the pre-data breach level; management intends to push full-year dividend per share back to ₩3,540.

Impact & implications

At the earnings level, growth in the traditional wireless business is weak, but improved broadband profitability and cost control support near-term earnings. At the valuation level, AI data centers provide a new growth option for the mature telecom business; if the company can first secure high-quality customers and then build capacity using financial investors, project financing, and partner capital, it may reduce the parent company's capital burden and maintain dividend stability. Conversely, if the 5GW plan lacks customer commitments, financing costs rise, or construction is delayed, the valuation assigned to AI assets could be revised down. The Anthropic stake will also continue to increase the share price's sensitivity to non-telecom factors.

Risks

• AI data center customer acquisition, financing, or construction progress may be slower than expected.
• Customer churn, compensation, costs, or reputational impact from the data breach may exceed expectations.
• Telecom industry regulatory pressure may persist or intensify further.
• AI data center capital spending may be higher than planned, putting pressure on the financial structure or shareholder returns.
• The Anthropic stake and AI-theme trading may trigger share-price and valuation volatility.
• Continued weakness in wireless service revenue could undermine cash-flow growth in the core telecom business.

What to watch

• Site, power, customer commitments, and construction timetable for the Ulsan AI data center project.
• Specific contract-signing progress with global large technology companies and other potential customers.
• Phased construction plan and actual commissioning pace for the 5GW capacity target.
• Scale, cost, and parent-company funding share of financial investor capital, project financing, and partner funding.
• Whether AI data center operating margins can approach the expected range of about 15% to 20%.
• Subsequent changes in wireless service revenue, average revenue per user, and SK Broadband profit contribution.
• Whether full-year dividend per share can recover to ₩3,540, and the balance between AI investment and shareholder returns.
• Follow-on impact of the data breach, regulatory developments, and changes in foreign investor shareholdings.